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Psychological Contract Free essay! Download now

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Psychological Contract

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In the context of the contemporary employment relationship, critically discuss the importance of ‘managing’ the psychological contract and the challenges associated with doing so.


In recent years, there exist many new types of economy in globalisation, and then it results in varying new types of job in which different job descriptions depending on different industries. More importantly, the role of employees is day by day appreciated as a core component in the development and the success of any organisational productivity and any company respectively. That is the reason why psychological contract needs to be invented in a new economy whilst loss of trade unions. Subsequently, this essay will not only clarify how the psychological contract is defined and how it is evaluated and applied in organisations in reality but also answer the question why a psychological contract is considered as so important in the management of the contemporary employment relationship.
By definition, psychological contract has been stated as “a set of unwritten reciprocal expectations between an individual employee and the organisation” (Schein, 1978:48) and “… the perceptions of the two parties, employee and employer, of what their mutual obligations are towards each other” (Guest and Conway, 2002:1). Also, another perspective has been defined as “The psychological contract, unlike expectations, entails a belief in what the employer is obliged to provide, based on perceived promises of reciprocal exchange” (Robinson and Rousseau, 1994, p.246). On the other hand, as for the nature of the employment relationship, Wilton (2011) referred this concept to “what is written or implied in contract of employment or the other explicit manifestations of the employment relationship” or subjected to “constant change”. Hence, psychological contract is considered as a meaningful concept and initial understanding need to be established at the beginning between employers and employees.
Broadly, the psychological contract is shaped by both individual factors (include age, gender, level of education and prior employment experience) and organisational factors (such as sector and competitive strategies) (Guest and Conway, 2004). These cause to impact on individual perceptions of “sense of fairness, degree of trust and deliver on the implicit deal” (Guest and Conway, 1997) and even determine the state of psychological contract. As a consequence, positive (e.g. job satisfaction, motivation, loyalty, lowered intention to quit, employee engagement or commitment,…) or negative (e.g. stress, intention to quit, disappointed,…) behavioural and attitudinal outcomes are recognised, which mediated by not only organisational influences of human resource policy and practise, job alternatives, the behaviours and the actions of managers but also the individual perceptions of employees.
Obviously, psychological contract is a reciprocal exchange has been established among employer and employee with implicit expectations, obligations and promises. Therefore, an individual employee could implicitly understand and believe that their hard-working and their contribution will be recognised and rewarded by employers’ perception although almost these things have not belonged to any ...

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